Broadcom’s AI Rally Pauses as Shares Retreat Following Stellar Gains

After months of delivering spectacular returns to investors, Broadcom’s high-flying stock encountered a setback. The chipmaker’s shares, which had surged approximately 90% over a six-month period fueled by artificial intelligence enthusiasm, closed nearly 6% lower on Friday. This decline has market participants questioning whether this is a temporary, healthy pullback after an extreme upward move or a sign that the AI investment frenzy is losing momentum.

Strong Fundamentals Contrast with Share Price Weakness

The sell-off presents a curious contrast to the company’s robust operational performance. For its fiscal third quarter of 2025, Broadcom reported impressive financial results, with revenue from its AI chip segment accelerating significantly. Sales of AI chips jumped 63% year-over-year to $5.2 billion, marking a notable increase from the 46% growth rate recorded in the preceding quarter.

CEO Hock Tan confirmed this positive trajectory, stating, “AI revenue growth accelerated to 63% year-over-year.” The company’s outlook remains bullish, with management projecting AI-related revenue will reach $6.2 billion in the fourth quarter.

Institutional Activity Highlights Market Divergence

The timing of the decline contained an element of market irony. It occurred just one day after Goldman Sachs reaffirmed its buy recommendation for Broadcom. Despite this vote of confidence from the prominent financial institution, selling pressure emerged as trading volume spiked 9% above average levels. Investors appeared determined to secure profits following the extended period of share price appreciation.

Goldman Sachs maintains that Broadcom stands to be one of the primary beneficiaries of multibillion-dollar investments flowing into AI infrastructure. However, the intensity of the recent advance seems to have prompted many shareholders to cash in portions of their holdings.

Should investors sell immediately? Or is it worth buying Broadcom?

Record Backlog Provides Visibility

A key factor supporting the optimistic analyst view is Broadcom’s extraordinary order backlog, which has reached a record $110 billion. A substantial component of this backlog stems from AI-related demand, predominantly from technology industry giants. This massive pipeline provides the semiconductor company with exceptional visibility and planning security for upcoming quarters.

The company’s custom AI accelerators and networking solutions remain in high demand among hyperscale clients who are committing billions of dollars to enhance their artificial intelligence capabilities.

Wall Street Maintains Positive Outlook

Despite Friday’s retreat, financial analysts have largely maintained their constructive stance on Broadcom. The average price target among market experts sits at $384, suggesting potential upside of approximately 11% from current levels. Some researchers are even more optimistic, with projections reaching as high as $420 per share.

The prevailing consensus recommendation remains “Strong Buy.” The rationale behind this position is that Broadcom captures value through two primary channels: its AI chip business and its infrastructure software division following the VMware acquisition.